LG Group is enhancing its cooperative system to improve payment conditions not only for first-tier suppliers but also for second- and third-tier suppliers. The company plans to encourage participation by offering various incentives to suppliers who actively engage in the program.
The Fair Trade Commission announced on July 6 that a signing ceremony for the 'LG Win-Win Agreement for 1st, 2nd, and 3rd Tier Suppliers' was held at LG Science Park, attended by representatives from seven LG affiliates and first, second, and third-tier suppliers.
The agreement includes participation from LG Electronics, LG Display, LG Innotek, LG Chem, LG Energy Solution, LG Household & Health Care, and LG Uplus. This agreement marks the third win-win agreement signed among major conglomerates, following SK Group on July 2 and Samsung Group on June 29.
The core of this agreement is to improve payment conditions between LG and first- and second-tier suppliers while expanding support for all tiers of suppliers.
Specifically, LG will operate payment closings at least three times a month for first-tier suppliers and ensure payments are made within 10 days after each closing. The company aims to increase the 'win-win payment spillover rate'—the percentage of payments made to second-tier suppliers from first-tier payments—to over 10%.
First and second-tier suppliers also committed to shortening payment deadlines for their lower-tier suppliers, increasing cash payment ratios, and utilizing win-win payment methods. In return, LG plans to provide various incentives, such as evaluation bonuses and financial support, to suppliers who actively participate.
Additionally, LG will expand financial and welfare support for second- and third-tier suppliers. Of the total 900 billion won in the Growth Together Fund, over 90 billion won will be allocated to support suppliers below the second tier. The eligibility for employee welfare mall membership will also be extended to employees of second- and third-tier suppliers.
All seven participating affiliates will establish a 'Subcontract Payment Dispute Mediation Body' to prevent disputes related to subcontract payments.
The Fair Trade Commission anticipates that approximately 1,300 suppliers within LG's supply chain will benefit from this agreement. LG plans to incorporate the agreement's contents into a fair trade agreement to be signed with suppliers early next year.
Chairman Joo Byeong-gi stated, "The competitiveness and sustainable growth of large enterprises are completed on a healthy industrial ecosystem that grows together with suppliers. I hope that a warm culture of win-win cooperation, starting from LG and spreading evenly to first, second, and third-tier suppliers, will take deep root."
* This article has been translated by AI.
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